The Budget Day in India is celebrated as a national event that every citizen awaits. 1st Feb 2025 was yet another Budget Day and the first budget of the third term of the Modi Government. While the Budget 2024 brought significant changes to the capital gain tax regime, this budget finally gave some relief to the taxpayer community. Check out this blog to know the Union Budget 2025 highlights and what it has for them.
The Union Budget 2025 is hailed to be finally a people’s budget with actual substance and not hollow promises. The changes in the direct and indirect taxes in this budget are explained below.
The vast middle class of the country eyes every budget with expectations that it will provide them with relief against the rising cost of living and the increasing financial burden. The Union Budget 2025 has finally listened to the needs of the middle-class population to make ZERO TAX LIABILITY up to Rs. 12,00,000 with a view to boosting consumption by leaving more funds in the hands of taxpayers.
Union Budget 2025 has revised the tax slabs for taxpayers starting from FY 2025-26. The revised tax structure under the new tax regime is tabled below.
Union Budget 2025 has increased the tax rebate under section 87A from Rs. 25,000 to Rs. 60,000, thereby making up to Rs. 12,00,000 with zero tax liability. Salaried taxpayers can also claim a standard deduction of Rs. 75,000 under the new tax regime making their taxable income of 12,75,000 effectively tax free.
TDS and TCS are strong pillars of tax collection but also cumbersome, especially for small taxpayers. This budget has removed the TCS on the purchase of goods from 1st April 2025. The government has also proposed that higher TDS will apply where the taxpayers fail to provide valid PAN. The Union Budget 2025 has taken this into consideration to reduce the burden on such small taxpayers and revised the TDS and TCS limits in the following cases.
Another measure to ease the burden on taxpayers is the extension in the time limit to file ITR-U, i.e., updated ITR in case of any errors or omissions. The earlier limit to file ITR-U was 2 years from the end of the assessment year which is now extended to 4 years. This will ease the burden on the taxpayers giving them more to file ITR-U and reduce the incidence of penalties.
Besides the above measures introduced by the government, the additional changes in direct taxes include,
No Tax on NSS Withdrawals - Withdrawals from National Savings Scheme (NSS) accounts will be tax-free from August 29, 2024, making it beneficial for senior citizens.
Extra Tax Deduction for NPS Vatsalya - Contributions to NPS Vatsalya accounts will get the same tax benefits as NPS under Section 80CCD(1B), i.e., an additional deduction of Rs. 50,000 over Rs. 1,50,000.
The changes in the indirect tax regime are highlighted below,
Removal of 7 more tariff rates, leaving only 8 (including zero rate).
Only one cess/surcharge per item; Social Welfare Surcharge exempted on 82 tariff lines.
Full BCD exemption on 25 minerals, including cobalt powder & lithium-ion battery scrap.
BCD on Interactive Flat Panel Displays increased to 20%, reduced to 5% on open cell components.
BCD exemption on 35 EV batteries & 28 mobile battery manufacturing capital goods.
10-year BCD exemption on raw materials for shipbuilding & shipbreaking.
BCD on Frozen Fish Paste reduced from 30% to 5%, fish hydrolysate from 15% to 5%.
New 2-year time limit (extendable by 1 year) for finalising assessments.
Time for utilising imported inputs extended from 6 months to 1 year; quarterly reporting replaces monthly.
The Union Budget 2025 has maintained the government's stand on promoting key sectors and infusing significant capex to create jobs and well-defined infrastructure that will be a road map to the Government’s vision of ‘Viksit Bharat 2047’. The modifications or measures introduced by the government to provide impetus to key sectors are highlighted below.
The government has revised the revised MSME classification under Budget 2025. The revised limits are,
The government has increased financial support for small businesses and startups by ensuring that the MSMEs (Micro and small enterprises) can now access up to Rs.10 crore in credit, adding Rs. 1.5 lakh crore in loans over the next five years. The credit limit for start-ups has been doubled to Rs. 20 crore, with a 1% fee for 27 key sectors. The government will also introduce customised credit cards with a Rs. 5,00,000 limit and issue them to 10 lakh micro-enterprises registered on the Udyam portal. A special Rs. 10,000 crore fund has also been set up by the government to support startups. The government has also given a boost to the footwear and leather sector with a goal to achieve Rs. 4 lakh crore in turnover and create 22 lakh jobs by giving duty exemptions on wet blue leather to boost production. The government will also provide identity cards and healthcare benefits for gig workers under the PM Jan Arogya Yojana thereby helping 1 crore workers get medical coverage.
The government is investing in housing, urban development, maritime infrastructure, clean energy, and manufacturing. The SWAMIH Fund 2 will provide Rs. 15,000 crore to complete 1,00,000 housing units, with 40,000 units targeted for completion by 2025. The Urban Challenge Fund of Rs. 1,00,000 crore will help cities develop as economic hubs while improving water and sanitation services. The Maritime Development Fund is set up with a Rs. 25,000 crore corpus to boost shipbuilding and port infrastructure. The government has also proposed to allocate Rs. 20,000 crore under the Nuclear Energy Mission for Small Modular Reactors (SMRs), with five reactors expected to be operational by 2033. Additionally, incentives will be introduced to promote clean tech manufacturing, focusing on EV batteries, solar PV cells, and wind turbines to support sustainable energy production.
The government is introducing several initiatives to support farmers and boost rural development. The Prime Minister Dhan-Dhaanya Krishi Yojana aims to improve agricultural productivity in 100 low-yield districts, benefiting 1.7 crore farmers. To achieve self-reliance in pulses like Tur, Urad, and Masoor, a six-year plan will focus on increasing production, using climate-resilient seeds, and improving farmer incomes. The Kisan Credit Card (KCC) loan limit has been raised to Rs. 5,00,000, benefiting 7.7 crore farmers, including those in fishing and dairy. The Rural Prosperity Programme will focus on skilling, technology, and reducing underemployment, with Phase 1 covering 100 agricultural districts. A Makhana Board will be set up to boost the production and marketing of makhana, especially in Bihar. Additionally, the Western Koshi Canal Project will provide irrigation benefits to over 50,000 hectares in Bihar’s Mithilanchal region, supporting agricultural growth.
The government is enhancing tourism, air connectivity, exports, and foreign investment. A modified UDAN scheme will be launched to connect 120 new destinations, adding 4 crore more passengers over the next 10 years. Fifty tourist destinations will be upgraded through skill programs, homestay loans, streamlined e-visa facilities and visa fee waivers for certain tourist groups to attract more visitors. The government has also increased the FDI limit in the Insurance sector to 100% for companies that reinvest their premiums in India, encouraging more investment in the industry.
The government is taking major steps to improve healthcare, education, and digital access. 200 Day Care Centres for cancer treatment will be set up in district hospitals to provide better care for patients by 2025–26. The high cost of medication is finally addressed by the government by making essential medicines more affordable. Customs duty on 36 lifesaving drugs has been fully removed, while six other critical medicines will have a reduced 5% duty. 10,000 new medical seats will be added in 2025–26, aiming for a total of 75,000 new seats over five years to train more doctors. Digital education is given a boost by establishing 50,000 Atal Tinkering Labs in government schools to promote innovation among students. Additionally, all rural secondary schools and primary health centres will get broadband internet access under the Bharat Net initiative thereby improving education and healthcare services in remote areas.
The Union Budget 2025 is hailed to have a good balance in meeting the expectations of the common taxpayer while ensuring the government stays focused on its long-term vision of developed India. The government’s boost to significant pillars of the economy and measures to increase domestic consumption are aimed at helping India create new milestones in the coming years and present itself to be a robust economy amid global uncertainties.
This article presents key insights into the Union Budget 2025 dissecting it and presenting what it has for the average taxpayers in the micro and macro levels. So what do you think of this budget, especially the changes in direct tax? Let us know your thoughts in the comments or if you need clarification on any aspect of this budget and we will address it.
Till then Happy Reading!
Marisha Bhatt is a financial content writer @TrueData.
She writes with the sole aim of simplifying complex financial concepts and jargon while attempting to clarify technical and fundamental analysis concepts of the stock markets. The ultimate goal is to spread vital knowledge and benefit the maximum audience. Her Chartered Accountant background acts as the knowledge base to help clarify crucial concepts and create a sound investment portfolio.
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